This article is the first in a series that will discuss how law departments are using technology to support their outside counsel management programs. Today’s focus is on the electronic billing system and how the system supports core, yet traditional, components of outside counsel management. Though eBilling systems have been commercially available for some time, law departments are demonstrating a new level of maturity with which they are using tools and data inherent within these systems.

Monitoring Compliance with Outside Counsel Guidelines

A benefit of the eBilling system is the ability to electronically “audit” incoming invoices for compliance with outside counsel guidelines. Some departments had originally enabled a large number of invoice rules with the unintended effect that vendors had difficulty submitting invoices due to significant invoice rejections. The result is that departments may need to temporarily disable or work around rules, or departments may have to dedicate staff to help resolve vendors’ submission issues. Departments have begun to simplify invoice rules, choosing to monitor only areas that have the most impact on overall spending, such as timely billing or unapproved rate increases.

Though departments may be simplifying the global rule set, at the same time, departments have also begun to apply matter-level rules. Tools that enable additional discounting beyond master service agreement rates or help to ensure flat or capped fee pricing allow departments to request and monitor for pricing structures that make sense for the type of work being retained.

Budgeting

Though requesting fee estimates for legal work is not new, the process for matter-level budgeting has evolved. Departments are requesting and tracking matter budgets not only for the life of the matter but also are requesting estimates for phases of work. By checking spend against budgets at different phases, in-house counsel are more likely to identify when the cost of a matter is becoming an issue before it is too late to take corrective action.

eBilling systems have also begun to offer functionality for gathering accrual information. When departments request unbilled totals on a regular basis as well as maintain requirements for timely billing, it is less likely that the department will be surprised by large invoices at year end.

Year end is also a time when departments evaluate vendors’ budget accuracy. Gone are the days when departments simply increase the budget after lawyers realize the costs of a matter will exceed the original estimate. Certainly there is unpredictability in many areas of law, but there are also areas that tend to be somewhat predictable. To this end, departments are reporting on final matter costs versus original estimates and then comparing vendors’ accuracy against one another. Vendors that demonstrate increased accuracy are rewarded with additional work.

Estimating

Estimating matter budgets is another area where technology is supporting outside counsel management. eBilling systems have rich billing data such that some departments are beginning to mine to understand the costs of matters with similar characteristics. By looking at historical staffing and time spent, it is possible to form estimates about how many people and hours will be required to complete the work. From these estimates, it is possible to predict costs under various pricing structures, and therefore evaluate vendors’ cost estimates for reasonableness.

Managing Receipt of Information

Recognizing the importance of budgets as well as case plans, status reports and other material that enable in house counsel to stay abreast of the matter, some departments have employed eBilling systems to monitor for document or data submission. If the vendor does not enter or upload the required documentation to the eBilling system, the system may flag or reject invoices.

Striking the appropriate balance is a bit of an art such that there are sufficient controls around the areas most likely to negatively impact a department’s spend or outcomes without creating too much administrative burden. But the increasing flexibility of eBilling tools is allowing departments to identify the level of control that suits them best.

Next month’s article will talk about how technology is enabling law departments to make informed decisions about staffing matters.